Dodgers, Major League Baseball Swap Accusations Over Loan in Court Hearing

By Steven Church -
Jul 20, 2011

The Los Angeles Dodgers and Major
League Baseball attacked each other in court over competing $150
million loan proposals, with baseball Commissioner Bud Selig
accusing team owner Frank McCourt of trying to break the rules
that keep the league together.

The team wants U.S. Bankruptcy Judge Kevin Gross to approve
the loan even though it would cost about $6.5 million more in
interest and fees than a proposal by baseball, Dodgers lawyer
Bruce Bennett said in court.

McCourt has rejected baseball’s proposal, saying Selig’s
hostility to him and the Dodgers makes it inappropriate for MLB
to provide the loan. The MLB loan would prevent the team from
holding an auction of the right to show games on cable
television, Bennett told Gross.

“We are trying to avoid a deal with the devil that is
attractive on the front end and has all kinds of problems on the
back end,” Bennett said today in U.S. Bankruptcy Court in
Wilmington, Delaware. The Dodgers’ preferred lender is JPMorgan
Chase & Co.’s Highbridge Capital Management LLC.

The Dodgers filed for bankruptcy after Selig rejected a
proposed cable-TV rights deal McCourt negotiated with News
Corp. (NWSA)’s Fox Sports. The team intends to try to sell those rights
while in bankruptcy and will propose rules for marketing them
next month, Bennett said.

Tom Lauria, a lawyer for Major League Baseball, asked Gross
to reject the Highbridge loan, saying it violates MLB’s rules
and is inferior to its proposal.

‘Mark the End’

The attorney said McCourt shirked his responsibilities as
an owner by putting the Dodgers into bankruptcy and is trying to
avoid following any baseball rules he doesn’t like.

“He seeks to have and enjoy rights to which no other owner
is entitled,” Lauria told the judge. Ending the baseball bylaws
that McCourt is trying to ignore, “would mark the end of Major
League Baseball as we know it,” he said.

Lauria was responding to comments earlier in the hearing in
which Bennett held out the possibility that McCourt will refuse
to obey some MLB rules.

“We can no longer be subject to the arbitrary and
capricious treatment” of Selig, Bennett said.

Interest Rate

Highbridge agreed to lower the interest rate from a minimum
of 10 percent to a minimum of 9 percent, Gary Kaplan, a
Highbridge attorney, said. While the loan may appear to cost
$6.5 million more than the MLB proposal, that estimate doesn’t
take into account the cost of resolving any court fights over
how to implement or interpret the financing, Bennett said.

The Dodgers also oppose MLB’s financing because it includes
many legal controls that would create conflict between the team
and baseball, Bennett said.

While searching for the best deal for a bankruptcy loan,
the Dodgers contacted at least seven lenders other than
Highbridge, Dodgers Assistant Treasurer Jeffrey Ingram said
while testifying about the Highbridge loan. Those lenders
included Goldman Sachs Group, Inc., Time Warner Cable Inc., Bank
of America Corp., Colony Capital LLC and General Electric
Capital Corp. and a financing company associated with the family
of Disney Co. founder Walt Disney called Shamrock, Ingram said.

The Dodgers ultimately picked Highbridge as the lender,
Ingram said.

Under cross examination by baseball attorney Glenn Kurtz,
Ingram said that many of the terms in the proposed baseball loan
were “better” than the Highbridge loan.

The case is In re Los Angeles Dodgers LLC, 11-12010, U.S.
Bankruptcy Court, District of Delaware (Wilmington).